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REMARKS 



USUEY AND ITS EFFECTS 



NATIONAL BANK A REMEDY; 



A LETTER, &c. 



/ 



BY WHITEHOOK. 



X/^;: 



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NEW-YORK: 

PRINTED BY HARPER & BROTHERS. 



1841. 



USURY, & c. 



'I hate him ^ * * * 

* * More, for that, in low simplicity, 

He lends out money gratis, and brings down 
The rate of usance here with us in Venice." 

Shylock. 



To A. B., Esq. 
My dear Sir, 

For more than thirty years we have both been 
engaged in active mercantile pursuits. We have 
together watched the fluctuations of trade : the alter- 
nations of abundance and scarcity of money ; the 
changes from steady confidence and sound credit to 
universal distrust ; the revolutions from even, mod- 
erate, and nearly uniform exchanges to uncertain, 
varying, and oftentimes ruinous charges or rates for 
collection and remittance. 

At our last interview, I expressed my firm con- 
viction that usury, taken openly or under disguise, 
either by direct charge or under the name of com- 
missions, exchange, or other device, was the real 
cause of most of the pecuniary distress under which 
the business of this country has laboured and lan- 
guished for the last six years ; and that our banking 
institutions are the instruments, and often the active 
co-operators, in producing the embarrassments they 



are intended to prevent, and often profess to relieve. 
The importance of the subject, to a community that 
has for many years suffered, and still suffers, under 
a derangement of her whole monetary system, and 
the absolute necessity of devising, if possible, some 
mode of rendering effectual and permanent relief, 
have induced me to yield to your solicitation, and 
attempt a plain and practical exposition of the views 
I have heretofore verbally expressed. And though 
well aware that it is easier to discover faults in a 
system than to improve it, I hope to be able to sug- 
gest a remedy for the evils of which I have spoken. 

The opinions I entertain are by no means in ac- 
cordance with the popular notions of the day, and 
probably not with the sentiments of many to whose 
opinions on other subjects I would cheerfully defer ; 
but they are the results of observation and experi- 
ence, and, as such, may claim some consideration. 
I am no logician, and if my argument should want 
system or my facts and illustrations be ill arranged, 
your own clear and ready apprehension will com- 
prehend their importance, notwithstanding the ob- 
scurities that may cloud the effort of a plain man 
and unpractised writer. 

Lest your prejudices in favour of our banking in- 
stitutions, and of fostering and sustaining a credit 
system, should dispose you unfavourably to attend 



to what I have to say, allow me to state preliminar- 
ily that I make war upon neither. On the contrary, 
I insist that a system of credits — individual credit, 
state credit, credit at home and credit abroad — is 
not only desirable, but indispensable, and that legit- 
imate banking is not less necessary to our prosper- 
ity ; by which I mean, banking honestly conducted, 
upon the principles and to secure the object avowed 
when the chartered privilege is asked, and for which 
the grant is made. 

And, notwithstanding the attacks constantly made 
in our political contests upon banks and banking, the 
importance of such institutions, properly regulated, 
and the convenience of a paper currency, always 
redeemable in specie, has been heretofore, and is 
now, so fully recognised by the policy of every 
state in this country from its earliest legislation, 
that it would be aside from my present purpose to 
discuss this policy. I only propose to consider the 
evils that have resulted from mismanagement, and, 
if possible, suggest a remedy that shall tend to 
protect the community against those great fluctua- 
tions in our monetary affairs which have frequently 
occurred, to the great injury of the business and 
enterprise of our citizens, and to the benefit of a 
few capitalists and dealers in money, who profit by 
such derangement, and are always ready to aid in 
A8 



producing it, that they may derive a large and^iisu- 
rious interest for the use of their money. 

In this place I wish also to notice one suggestion 
often made for the purpose of explaining the em- 
barrassment of the times upon which we have fall- 
en. It is, that over trading and extravagance are 
the cause ; that we have imported too much ; that 
credit was too easily obtained, property estimated 
too highly ; that the rage for speculation was there- 
by begotten, and imprudence and extravagance of 
every description ensued, and, by necessary conse- 
quence, a revulsion followed which spread ruin far 
and near. This is true in part, but only in part. 
This country, during the years immediately prece- 
ding our severest pressure, did not import more, in 
proportion to our inhabitants, than had been import- 
ed in many former years, when all kinds of busi- 
ness prospered. Hundreds and thousands of our 
men of business were no more extended in 1837 
than they had been, in proportion to the amount of 
cash capital, for twenty years preceding, when they 
felt no inconvenience in meeting their engagements. 
And I mention, by way of example, one firm, which, 
after a prosperous business of fifteen years, with a 
clear surplus capital of more than $100,000, and 
not so much extended as during many of the pre- 
ceding years, was entirely ruined in one year, while 
heir mode of doing business remained precisely 



the same, their operations governed by the same 
prudence, and the amount of their liabilities was, in 
proportion to their assets, actually less than it had 
previously been ; and this without any fictitious es- 
timate of the value of their property begotten by 
over credit. And hundreds are now in poverty who 
had actually accumulated large fortunes by the earn- 
ings of fifteen or twenty years, and without any 
more imprudence than during the twenty years of 
their prosperity. 

But, as I have said, the suggestion is true in part. 
Speculation has had its influence ; false credit has 
co-operated, and extravagance has aggravated the 
evils. But these alone are inadequate to produce 
the result ; and, without the aid of the very evil 
which it is my purpose to explain, they never could 
exist to any such extent as to produce any long-con- 
tinued embarrassment in any country. If I do not 
altogether fail in the object I have in view, you will 
see, in what I have to say on the subject, that there 
is another entirely adequate cause not only co-oper- 
ating with these, but actually and as truly control- 
ling all speculation, false credit, and extravagance, 
as it does the employment of capital in a safe and 
prudent business. 

It is money, or, more truly, it is the price of the 
use of money, in the hands of our money-lenders 
and in our banks, that controls all business. And 



8 

whether it is to be employed in " regular business" 
or in speculation, or otherwise, it is change, fluctua- 
tion, expansion, and curtailment ; great facilities for 
obtaining credit to-day and none to-morrow, which 
at one moment encourage enterprise, foster industry, 
and prompt to speculation, and at the next cramp 
all our energies, compel ruinous sacrifices, embar- 
rass and impoverish the prudent and industrious, 
and ruin the speculator. This it is that has produ- 
ced our misfortunes, and this it is that has continued 
and will perpetuate them. And this is the usurers' 
work (banks or individuals, be they which they 
may) ; the work is theirs, and upon them be the 
curse. 

To turn, then, to my proposed argument. 

I. My first proposition was, that the paying and 
receiving of usury in some form is the real cause 
of the pecuniary embarrassments of which we have 
so long complained. I here define what I mean by 
the taking of usury. It is the taking for the use of 
money more than the use of money is worth. Now, 
whether this be done under the name of interest, or 
exchange, or commissions, or other device, is wholly 
immaterial ; in every form the consequences to the 
individual and to the public are the same ; the loss 
to the borrower and the profit to the lender are in 
each form the same. 

It has been said that the use of money is worth 



what it will bring. This I deny. This is only the 
lender's doctrine. As to him, it is true that, if he 
can obtain two per cent, a day for the use of his 
capital, the use of that capital is to him, for the pur- 
pose of making the loan, worth two per cent, a day. 
But to the borrower the use of money is never 
worth more than the nett profits of its employment. 
Exigencies and embarrassments may compel the 
borrower to submit to an exaction far exceeding 
these profits. Out of the accumulated earnings of 
years of patient industry he may consent to give the 
one half of all he possesses to save the other half, 
but this is no test of the proper value of the loan 
he seeks. As well might it be said that the plank 
for which the drowning man would gladly pay the 
half, nay, all his fortune, is worth the price he offers. 
His life is worth more than his fortune, but the 
plank is but a piece of timber still. 

This is not only true of the individual borrower, 
but is even more obviously true when the use of 
money in the community at large is considered. 
Indeed, it is by making the inquiry in this more 
comprehensive view of the subject that the real 
worth or value of the use of money can be learned. 
Wealth is increased by production, and by produc- 
tion alone. Money changing adds nothing ; with- 
out labour there can be no production; labour is 



10 

vain without the means of applying it. Whatever, 
then, in any community, is found to be the actual 
profit upon the employment of capital in producing, 
that, and that only, is the real worth or value of the 
use of money. And this is easily ascertained; a 
series of years will in any country determine this 
profit; take the average of ten, twenty, or, if you 
please, fifty years, and whether the result be five, 
six, or seven per cent, profit (for I will not stop to 
fix the rate) per annum, some rate greater or less 
will be found to determine what this value is. And 
I confidently assert that, if there be any instances in 
which the use of money is in any proper sense worth 
to the borrower more than this rate per cent., they 
are but individual exceptions, and very rare excep- 
tions, to an otherwise universal rule. While, on the 
other hand, there are many whom accident, misfor- 
tune, or oppression has driven to the alternative of 
making what they deem the lesser sacrifice to avoid 
a greater loss ; from whom the lender wrings the 
utmost farthing necessity will offer, and argues 
thence, " My money is worth what it will bring." 

For example, a really wealthy merchant, disap- 
pointed in receiving an expected remittance, with 
ample securities in his possession, found himself at 
two o'clock in want of five thousand dollars. Too 
late to borrow the money at the fair value of its use 



11 

where his known wealth and ready securities might 
have availed, he called upon a broker ; his necessi- 
ties he in honest candour revealed. He was re» 
ceived with great courtesy, but it is *' late in the 
day ;" the broker's " bank account is naade up ;" 
"nothing over;" "possibly the money can be pro- 
cured," and similar suggestions, called out from him 
offers of large reward for assistance. He held in 
his hand, in undoubted securities, $10,000. For 
these he must have money; and, without attempt- 
ing to give you a farther detail of the mockery of ex- 
cuses and pretences by which he was robbed, suf- 
fice it to say, the broker received the securities, the 
merchant received the $5000, and a few days af- 
terward a farther small balance ; and within a week 
afterward the broker, without difficulty, obtained a 
discount of the same paper without recourse to him- 
self, and his clear profits on the transaction were 
more than $3000. And this he calls getting for 
the use of his money what it is worth, i. e., what it 
will bring. 

In this country especially, nearly all the actual 
capital is invested, or so employed in business as 
not to be immediately convertible. In any com- 
munity the amount of floating capital is compara- 
tively very small, and with us this is true to a 
greater extent than probably in any other. For the 



12 

time being the community require and must have 
the same amount of money for the various purposes 
of business, whether it cost six per cent, per an- 
num or three per cent, a month. The holders of 
this floating capital are comparatively few, and they 
are the lenders. At any one point where business 
concentrates the proportion is very small. The in- 
terest of all the lenders is the same. Nothing, then, 
is easier than, by temporarily withholding this float- 
ing capital from those whose enterprise and busi- 
ness require the use of their own capital and credit 
also, to produce an apparent scarcity of money. 
Any indication of this is always followed by alarm 
and suspicion, and then the usurer's profit commen- 
ces ; a profit, not that which can be made to result 
from the employment of the money he lends, but a 
profit based upon the necessities of others which he 
himself has produced. And as surely as this can 
be done upon a small scale in any one place, so 
surely can the same result be effected by concert 
among the few throughout the whole country ; a 
concert which it requires no actual consultation 
or agreement to produce, but which invariably re- 
sults from like interests prompting to like conduct 
under like circumstances. If illustration of this 
point be desired, estimate the amount of real estate, 
manufacturing establishments, produce, and mer- 



13 

chandise in any one city or town in this country, 
and compare it with the amount of money actually 
used for the purposes of business — or extend the 
comparison to the United States. The whole 
amount of real estate and other property in the 
State of New- York alone, at the assessed value, is 
over six hundred and fifty millions, while the amount 
of money with which the business of this state is 
carried on is less than thirty-five millions, including 
gold and silver and the whole circulating medium, 
whether specie, bank bills, or deposites. 

If the same comparison be made between the 
amount of money and the amount of the business 
operations, by which all other capital is made pro- 
ductive (which is not less than three thousand mill- 
ions, and probably much more), the proportion will 
be found not greater than one dollar in money for 
$85 to be borrowed, lent, paid, or employed. 

Thus, there are among the merchajits of the City 
of New-York one hundred whose aggregate amount 
of business carried on will exceed forty millions of 
dollars. These, therefore, alone require for their 
receipts and payments the whole circulating me- 
dium of the State of New-York, which must pass 
through their hands in some form in the course of 
the year. However wealthy they may be, what- 
ever capital they may have, they must have this 
B 



14 

amount for the purpose of circulation, and, if not, 
they will inevitably suspend. 

But, to make the case more clear, the whole pop- 
ulation of this state is about 2,400,000. The con- 
sumption of food and clothing alone is not less than 
$60 for each individual, i. e., $144,000,000, all luxu- 
ries included. Now, in producing, sending to mar- 
ket, selling to the merchant, to the manufacturer, 
the process of manufacturing, the return again to 
the merchant, and sale by him to the retailer, and 
by him to the consumer, we may safely say this 
amount of $60 in food and clothing is bought and 
sold at least four times ; and, if so, the whole re- 
quires a circulation in some form amounting to 
$576,000,000 to supply food and clothing alone. 
Now, add the probable amount required for the oth- 
er necessaries, and for branches of trade not apper- 
taining to the supply of mere necessaries of life ; 
that is, purchase and sale of stocks, traffic in other 
personal property, purchases and sales of lands, the 
building of houses, manufacture of furniture, ship- 
building, construction of railroads, canals, and other 
internal improvements, purchasing stock for our 
farms and supplying all the implements of husban- 
dry and manufacture, and money loaned on bond 
and mortgage and otherwise, the gross amount of 
all which will almost defy computation. It is quite 



15 

sufficient for my present purpose (though far short 
of the actual amount) to say it is five times the 
amount required for the supply of food and clothing 
above named ; and even upon this lov^r supposition 
the whole amount of payments and receipts in 
the State of New-York in one year will exceed 
$3,000,000,000. Now, as I have already suggested, 
this sum is paid and received in the circulating me- 
dium, made up of gold and silver, bank notes, and 
deposites in bank, which latter become (in our cit- 
ies especially) a part of the circulating medium by 
being the basis of bank checks constantly passed 
from hand to hand in making collections and pay- 
ments. 

By referring to the table which I annex, showing 
the bank-note circulation and deposites in bank in 
this state from 1st of January, 1835, to 1st of Jan- 
uary, 1841, inclusive, it will be seen that the aver- 
age of bank-note and bank-check circulation in this 
state is $34,000,000 in each year. The specie cir- 
culation is not, I think, in this state, more than 
$500,000 ; but say, for our present purpose, it may 
be $1,000,000 in actual circulation, and we have then 
a circulating medium of $35,000,000 with which, 
and with which alone, to make payments to the 
amount of three thousand millions. It is impossi- 
ble, from the nature of the subject, to attain certain- 



16 

ty in a calculation of this kind, but these suggestions 
are sufficient to show that the payments actually 
made in any one year are at least 85 times the 
amount of the whole circulating medium of the state. 
So small a proportion is made to answer these pur- 
poses by the rapidity with which it circulates, and 
by means of the credit necessary till the circulation 
is completed, the profits of labour and business real- 
ized, and the balances adjusted. Now, suppose the 
holders of this one dollar, or j^ih part of the amount 
of business carried on, temporarily withholds it from 
its accustomed channels. All others, no matter to 
what business they are devoted, or how much capital 
they have invested, or how great their actual wealth, 
must resort to extraordinary means to procure the 
required amount of money, to pay or employ, as 
their engagements render necessary. If one capital- 
ist withholds his funds, another demands an enhanced 
premium for his money, which borrowers and debt- 
ors must pay. He in turn withholds, and the first 
raises the premium still higher. Alarm and embar- 
rassment result, and, without expansion in business, 
without the slightest extension of credit beyond what 
has heretofore existed, without the removal of a dol- 
lar from the town, city, or country, the rate of inter- 
est is raised from 6 or 7 per cent, per annum to 1, 
2, 3, or 5 per cent, per month, at the pleasure of 



17 

those who hold the money for the purpose of lend- 
ing, and whose common interest binds to concert in 
action to produce the result ; and as often as the 
business adapts itself to this new state of things, so 
often, by a similar movement, another like state of 
embarrassment is produced. 

The usurers often say, in vindication of their ex- 
orbitant exactions, that their risk is great, and they 
should therefore be paid a premium proporlionably 
greater ; in other words, besides interest on the loan, 
they should be paid for the risk. I answer, first, if 
the risk were greater, they have themselves produ- 
ced the state of things by which they now seek to 
justify the extortion, and for the very purpose of 
making a profit thereby out of the necessitous. 

And, secondly, the fact is not so. The usurers 
not only require exorbitant interest, but they require 
and actually receive better security than any other 
business men. The merchant sells goods, the me- 
chanic and manufacturer give their labour and sell 
their wares and manufactures, and the farmer sells 
his produce, and all receive the notes of their cus- 
tomers. Now, suppose the merchant, mechanic, or 
farmer is driven to the usurer for a loan ; will he 
discount the notes received in their usual business ? 
No ; he must have the best of paper, well endorsed, 
and oftentimes requires an hypothecation of these 
B2 



18 1 

same business notes, or other securities of two or 
three times the amount loaned ; and in my experi- 
ence I have found that the usurers have lost less 
than any other class of men who have had their 
capital employed in business transactions. 

An instance mentioned to me by a man of un- 
doubted veracity will illustrate what I have stated. 

The sufferer was a coal-dealer. He had pur- 
chased in Philadelphia seven cargoes of coal at 
about $800 each cargo, amounting to $5600. For 
this sum he was drawn upon at short sight. Most 
unfortunately, head-winds and storms prevailed, so 
that at the end of three weeks not one cargo had 
arrived in New-York ; and, though he had ready 
means provided to the amount of more than $4500, 
in this unexpected exigency he wanted about $1000 
to pay the last draft. His correspondent in Phil- 
adelphia wrote him that the draft had been dis- 
counted in bank, and, notwithstanding the disap- 
pointment, chargeable to the winds and the waves, 
and not to any want of prudence, no delay or ex- 
tension could be had. The money must be had, or 
his name would be dishonoured. He was driven to 
Wall-street to raise the money. There he was 
compelled to give his note for $1000 with interest, 
and receive therefor $1000 in " red-back" money, 
■which, by agreement, he was to sell to the brokei 



19 

who made the loan at six per cent, discount, i. e., 
for $940, and to pledge, as collateral security, the 
seven cargoes of coal, by assigning the bills of lading 
and policies of insurance, and farther to pay such 
interest as would be right. 

^ On the arrival of two cargoes of coal, the broker, 
with great show of kindness, gave him an order to 
receive them, retaining the remaining five until the 
payment of the note. He sold the two cargoes for 
about $1600, and with the proceeds called to pay 
his note and release the residue of his coal. The 
note had run just ten days, and the broker charged 
him two per cent, a day upon the face of the note, 
$1000 ; and to release the residue of the coal he was 
therefore compelled to pay $1200, i. e., for the use 
of $940 for ten days he was compelled to pay $260 : 
and certainly the security in this case was ample; 
Now, consider for a moment what $940 would 
amount to in one year at the rate the coal-dealer 
was required to pay through this extortion, suppo- 
sing the loan and interest returned, as in this case, 
at the end of every ten days. The first loan of 
$940 in ten days amounted to $1200. Now, lend 
the amount of $1200 for ten days at the same rate, 
and it amounts to $1531 80. Lend this amount 
of $1531 80 for eight and a half dciys at the same 
rate, and it amounts to over $1880. That is to 



20 

say, the principal, $940, will be doubled in twenty- 
eight and a half days, and the $1880 loaned in like 
manner, in twenty-eight and a half days amounts 
to $3760. The amounts may then be stated thus : 
$940 in twenty-eight and a half days amounts to 
$1880; in fifty-seven days, $3760; in eighty-five 
and a half days, $7520 ; in one hundred and four- 
teen days, $15,040; in one hundred forty-two and 
a half days, $30,080 ; in one hundred and seventy- 
one days, $60,160 ; in one hundred ninety -nine and 
a half days, $120,320 ; in two hundred and twenty- 
eight days, $240,640 ; in two hundred fifty-six and 
a half days, $481,280 ; in two hundred and eighty- 
five days, $962,560 ; in three hundred thirteen and 
a half days, $1,925,120 ; in three hundred and for- 
ty-two days, $3,850,240 ; in three hundred and 
sixty-five days, $6,697,369. That is to say, in one 
year $940, loaned at the rate exacted of the coal- 
dealer, amounts to more than six and one half mill- 
ions of dollars. This would seem a large interest 
for the borrower to pay, and yet, when the coal- 
dealer called to pay his note and asked the broker 
to take less, his reply was that he could not aflford 
it ; that he could have done a great deal better with 
his money; that he only lent it to accommodate 
him. 

Suppose, now, this broker could have left these 



21 

securities with a bank for a temporary loan until 
the arrival of the coal, what would be his profits ? 
Thus : he buys from the bank the use of $940 for 
ten days for one dollar and fifty-seven cents, and 
sells its use to the coal-dealer for $260, which is 
more than one hundred and sixty-five and a half 
times as much as he gives, and is equal to buying 
a barrel of flour for one dollar and fifty-seven cents, 
and selling it again in the same market the same 
day for $260. Neither party buys the money ; they 
only rent it, or buy its use for a certain period, as 
any other property is rented, to be returned to its 
owner at a future day, and the use of the property 
only to be paid for. 

It will be said that th^s is an extreme case. If so, 
extreme cases are numerous, as the experience of al- 
most all borrowers will prove. But, if it be an ex- 
treme case, from two and a half to six per cent, a 
month are notoriously common, and that upon the 
best of security. And as the payment of from two 
and a half to six per cent, a month and confidence 
never go together for any considerable time, the 
usurer extorts from his victim only so long as he 
considers himself safe; and knowing, better than 
the anxious borrower, that he who undertakes to 
maintain his business by paying such interest must 
inevitably soon break, he turns him by for other 
fresh victims. 



22 

Many millions of dollars have, within the past six 
years, been loaned in Wall-street at from two and a 
half to six per cent, a month ; and it needs but a brief 
calculation to show how certainly the payment of 
these rates will ruin any man, how rich soever he 
may be. 

Take six months' paper, and pay the interest (as 
usually required) in advance. With $1000 in mon- 
ey the usurer will buy a note for $1428 56 at six 
months, i. e., five per cent, a month off the face. At 
the maturity of the first note, with the proceeds, 
$1428 56, the usurer will buy another note for 
$2040 80 ; at the maturity of which note, that is, 
in one year, the usurer has doubled his money, and 
received $40 80 in addition. Now, suppose we 
reject this small sum, and assume that the money 
only doubles in one year. 

The $1000 is doubled in one year, amounting to 
$2000 ; which at the end of two years is doubled, 
and amounts to $4000 ; at the end of three years, 
$8000; four years, $16,000; five years, $32,000; 
six years, $64,000; seven years, $128,000; eight 
years, $256,000 ; nine years, $512,000 ; ten years, 
$1,024,000 ; and by the same rate it will amount, in 
ten years more (i. e., 20 years), to $1,048,576,000; 
and again, in ten years more (i. e., thirty years), to 
$1,073,741,824,000; more than ten hundred and 



23 

seyenty-tbree thousand millions of dollars, which is 
more than ten times the value of the whole proper- 
ty, real and personal, in the United States. By the 
same rate of interest, taken in advance as before, 
ONE CENT will in fifty years purchase the property 
of the whole world. "^ 

Now, the above is calculated upon the supposition 
that the usurer retains each note he receives until 
its maturity. But, in truth, the usurers are the par- 
ties who receive the largest discounts at our banks, 
so that in almost all cases he obtains the money 
from the banks at lawful interest for the same notes 
he has purchased on or about the day he makes 
the purchase, and is ready with the proceeds to buy 
another note the next day. If the profits are in- 
creased by this additional advantage, the amount, 
by calculation, would be one hundred and fifty times 
the sum above stated. 

If these facts are so, and I challenge the denial, 
is it strange that our merchants, mechanics, and 
men of enterprise are broken up ? Is it surprising 
that property of every description is depreciated, that 
great pecuniary distress has prevailed? On the 
contrary, when the power of banks and moneyed 

** * Any person disposed to make the calculation will discover that 
the one cent will in fifty years amount to $11,258,999,068,426 ; 
and if all the fractions be included in the calculation, the amount 
will be much greater. 



24 

tnen to produce a state of things that will drive men 
of business to the usurers for loans is considered, is 
it not rather wonderful that our distress is not 
greater ? 

Farther, the devices under which these exorbitant 
rates of interest are exacted oftentimes conceal the 
iniquity of the transaction ; and so ingenious are 
the greedy plunderers of the earnings of honest in- 
dustry, that they sometimes publicly profess to come 
forward to relieve the wants of the public, and claim, 
and really appear, to be public benefactors. Thus, 
in 1836, 7, some prominent capitalists, for the pur- 
pose, as was said, of " relieving the money market," 
offered very largely to sell bills of exchange on 
England, and take the merchants' notes at sixty 
days (interest deducted) in payment. Such sales 
were made to an immense amount, as we all well 
recollect. But how was this managed by these 
pretended benefactors, usurers in disguise ? They 
charged and took from twelve to sixteen per cent, 
premium for their bills, when the same and other 
bills were sold at eight per cent, for cash by those 
whose necessities forced them to resort to such 
means to raise money. The notes were discounted 
in bank for the same parties at legal interest, and 
often without endorsement. 

Now, the usurer sells me to-day a bill on London 



25 

at sixty days for sixteen per cent, premium for my 
note with lawful interest. He buys the same bill 
to-morrow at eight per cent, for cash, or another 
bill for the same amount : he has made eight per 
cent, clear profit. If he gets my note discounted, 
he repeats the operation the next day ; and thus the 
usurer accumulates his unhallowed gains, and the 
business man, under cover of a transaction in ex- 
change "for the relief of the merchants," is plun- 
dered of the premium, which his present necessities 
force him to yield to extortion. 

Money is said to be the measure value. This is 
no doubt plausible in theory, but, under our present 
system, the experience of every man proves it to be 
practically false. For illustration, take an example. 
In 1834 a store in Pearl-street rents for $1800 per 
annum, and taxes and insurance ; money can be bor- 
rowed at 6 per cent, per annum. What is the true 
value of the store ? When measured by the above 
standard, clearly it is worth $30,000. In 1839 
money commands 3 per cent, a month, and the 
store rents for the same sum as before. What is 
now the value of the store by the same standard ? 
As clearly only $5000 ! because $5000 in one year 
will at interest produce the same income. 

Now, does this not show most conclusively that 
money is in no sense the measure of value, unless 
C 



26 

the value of its use^ u e., the interest, is fixed and 
permanent. 

The government which, by making money, and 
money only, a legal tender, has made it the repre» 
sentative of property, is therefore as much bound 
to fix unalterably the rate or value of its use as to 
fix the length of the yard-stick or the superficial 
area of an acre. 

And so long as, by evasion of law, by tricks or 
devices of the ingenious, by cover or pretence, the 
rate of interest may be varied, so long will the 
value of property of every description be raised or 
depressed at the pleasure of those who can profit 
by the fluctuation. 

He who debases our coins is punished as a felon ; 
and should I be compelled to receive what is due to 
me in coin half gold and half base metal, I am 
robbed of one half of my just rights. I am no less 
robbed of my rights when, by doubling the rate of 
interest, I am forced to sell my house to-pay my 
debts at one half what it would have brought. 

The forger, too, is sent to the penitentiary. 
Why 1 Is it because he has injured any one by 
his forgery ? No. He may not have succeeded in 
profiting at all by his forgery ; and if he has, he 
may be able and be compelled to repair the loss 
he has occasioned. It is because the community 



27 

are wronged ; the public are unsafe if he go un- 
punished. But I state, without fear of contradic- 
tion, that the amount of loss sustained by the bu- 
siness men in the city of New-York within the last 
four years by usurious exaction is greater than the 
amount of all the forgeries committed in the whole 
United States since this Continent was discovered. 
But, again, one is said to be a voluntary loss. Be 
it so, it is a public injury still. And he who will 
take advantage of general or individual distress to 
extort from the necessitous, is little better than he 
who takes advantage of superior strength to rob on 
the highway. 

II. That usury is the real cause of our pecuniary 
embarrassments, will appear more obvious when I 
show you that our banking institutions are the in- 
struments in producing this result. 

A large proportion of those who have the actual 
management of the banks are lenders upon usury. 
I would not assert that the officers of all the banks 
in the city of New-York are at this moment usu- 
rers. But I do say that the present or former offi- 
cers of most of the banks in this city are or have 
been usurers themselves, or have had those under 
their patronage who were. But whether the offi- 
cers themselves, directly or indirectly, participate 
in the profits of usurious lending, is not material to 



28 

my purpose to inquire ; it is enough that the loans 
and discounts which they make are in fact, in every 
period of commercial distress, employed for that 
purpose. 

The experience of nearly every business man in 
the City of New-York proves the truth of what I al- 
lege. When the money capitalists are lying by 
watching the times, and waiting for opportunity to 
lend upon usury, ihe discounts to regular dealers are 
made so far as the securities offered are good, at law- 
ful interest, and the business community feel no want 
of money ; and oftentimes the banks themselves, so 
far from reluctantly discounting to meet the exigen- 
cies of business, seek out borrowers, and invite the 
offer of good paper for discount. But presently 
their deposites are drawn out by the usurers, the 
banks begin to curtail their discounts, refuse to re- 
new paper discounted, and the merchants are driven 
to usurers for their necessary accommodations ; and 
this, too, while their business is conducted upon the 
same safe and prudent system, and the securities 
they offer are not a whit the less worthy of confi- 
dence. But this is not the worst stage in the pro- 
ceeding. The usurers now become competitors for 
discounts at the banks. Hitherto they have offered 
nothing themselves for discount ; have not wanted 
it ; but have kept " good accounts," by which the 



29 

banks mean large deposites. Now they have crea- 
ted the opportunity to shave notes, and they begin 
to want discounts. They have good paper to offer, 
and they naust have the preference. The banks 
recognise the claim, because " they have kept good 
accounts." And now more of the paper of regular 
dealers is rejected to enable the banks to accommo- 
date this new demand, and, of course, more mer- 
chants are driven to borrow upon usury. With the 
very paper purchased at 10 or 12 per cent, per an- 
num discount, the usurer obtains farther and farther 
discounts, and by so much he increases the demand 
for loans upon usury. 

To enjoy to the full extent this influence and ac- 
commodation at the bank, he makes an implied 
agreement with the banks to give them a portion of 
these profits, not, indeed, by direct participation in 
the usurious gain, but thus : 

One of them wants say $50,000. He " keeps a 
good account," out of which the bank has the profit of 
discounting. He must have the money, and he gets 
it. The paper of ten or twelve regular dealers is 
thrown out in consequence. The merchants go into 
Wall-street to the same man or his agents, and are 
told that money is scarce, that the banks are cur- 
tailing ; and if the securities are undoubted they 
get shaved as a matter of special favour at 1 or 2 
C2 



30 

per cent, a month. Some alarm is felt, and all the 
moneyed men begin to operate in the same way. 
To ensure the instrumentality of the banks, they en- 
ter into a private understanding with the officers. 
They must have the former discounts repeated. 
For example, take the usurer who had the $50,000. 
He tells the president he must have the same 
amount he had before ; that he only wants to draw 
to-day $10,000, in a few days $10,000 more, and 
soon after $10,000 more ; and that the balance, 
$20,0.00, may remain to his credit until the maturi- 
ty of the paper discounted. 

This, of course, again comes in conflict with the 
interest of the merchant. His paper is thrown out, 
and he is driven to the same resort as before, and 
this time a heavier " shave" is exacted. 

If he inquire at the bank why his paper is thrown 
out, he is told that the offerings are very large and 
money scarce ; that his balance is small ; that many 
of their customers have kept good accounts for a 
long time, and seldom asked for a discount, and 
they must divide it. They do divide it by giving 
nearly all that is wanted to those who only want 
the money for the purpose of shaving those whose 
offerings are rejected, and often by discounting for 
the usurer the very paper purchased at one or two 
per cent, a month discount, after the previous re- 



31 

jection, because it is now offered by one who 
" keeps a good account." Why do the banks deal 
thus with the merchants ? Because it is for their 
interest ; because the " note shaver" will allow one 
third or one half the amount to remain with them 
on deposite, and thus enable them, by repeating the 
same operation with others (discounting on their de- 
posites), indirectly but actually, to reahze, instead of 
six, twelve per cent, on their loans. I hesitate not 
to say that this is the common practice, and I appeal 
to the merchants in the city of New-York to say 
whether, in times of apparent scarcity of money, 
when brokers and " note shavers" are their compet- 
itors for discounts, they can procure accommoda- 
tions in bank. The answer, I am certain, will be, 
No, unless through the influence of personal favour 
or friendship with bank officers ; or unless, by suf- 
fering a large portion of the proceeds to remain un- 
drawn, we indirectly pay the banks one per cent, a 
month for the loan. Hence it is that deposites in 
banks are never so large as at the very time 
that money commands two or three per cent, a 
month. Again, suppose money becomes easy ; the 
demand is adapted to the supply, for, after a time, 
as no money leaves the country, this will certainly 
ensue, and the usurer can no longer obtain more 
than the fair value of the use of his money. The 



32 

money-lenders no longer asking for discounts, the 
banks seek out borrowers among business men ; 
money is now said to be plenty ; the operations of 
business men again become conformed to the exist- 
ing state of the market, and all goes on prosper- 
ously. But now the money-lenders predict ap- 
proaching scarcity of money, and begin to draw 
their deposites from bank ; perhaps even draw a 
few hundred thousand dollars in specie, which cre- 
ates some little alarm ; the banks begin to call in 
their loans on stocks, and stocks fall in the market. 
They curtail their discounts, and an unusual de- 
mand for money, and a depreciation in the means 
of procuring it, ensue, and again the usurer begins 
to exact his own treble compensation for the tem- 
porary loss of interest he chose to submit to ; and 
now, again, he becomes a competitor at bank for 
discounts, and, by the same means as before, a usu- 
rious system of plunder worse than robbery is be- 
gun and maintained, to the utter destruction of hun- 
dreds otherwise prosperous men. The predictions 
of the usurers have been verified. Money is, in- 
deed, exceedingly scarce, and is worth (upon the 
usurers' rule of value " what it will bring") what it 
will destroy any class of business men to pay. Do 
you doubt the facts I stale ? I not only allege their 
truth, but I assert that this is not all. As if it were 



33 

not enough to make the banks in this manner the 
instruments of this most abominable system of 
plunder, the history of the City of New- York shows 
that, during the periods of the greatest commercial 
embarrassments we have experienced in the last ten 
years, the brokers, principals or agents in this most 
nefarious traffic in money, have, besides their enor- 
mous discounts, held loans amounting to from 
$50,000 to $200,000 each, and some of them, to 
the end that no good opportunity to shave a note 
might be lost for want of means, have had the priv- 
ilege in bank of overdrawing their account on any 
day to the amount of $50,000. And I recollect of 
one instance of a personal friend of my own, who, 
being himself a director in bank, was compelled to 
submit to a heavy shave on a note for five thousand 
dollars, and learned, at the next meeting of the board, 
that the money which he received from the usurer 
at two and three quarters per cent, a month, was 
part of the proceeds of the same paper discounted 
by the president of the bank for the usurer on the 
same day. 

The immediate consequences of this are a depre- 
ciation of stocks, real and personal property of all 
kinds ; and those whose exigencies require money 
must either throw their property into market and 
submit to a heavy loss in that way, or choose, what 



34 

I deem the greater evil, the payment of usurious 
interest. 

I well recollect that in the year 1839, and at 
other times during the past four years, the paper of 
one of the first mercantile houses in this city (whose 
names it is not necessary to give), of large wealth 
and still in high standing, sold in Wall-street at from 
three to even as high as eight per cent, a month 
discount ; and at the same time such paper was 
readily discounted at our banks for any who, either 
through official influence or by admitting the banks 
to an indirect participation in the usurious profits, 
could obtain bank accommodation. Now, it is well 
known that the directors in some of our banks have, 
under our laws, a right to receive discounts to the 
amount of one third of the capital. For example, in 
the Bank of America the proportion which each 
director would be entitled to receive would thus be 
about $50,000. Suppose, then, the president or 
other director of that institution buysj^rs^ a note of 
such a house as I have named (suppose John Hag- 
gerty and Sons, or Adee, Timpson, and Co.), hav- 
ing ninety days to run, for $3000. He receives as 
discount, at the lowest of the above rates, three per 
cent, a month, nine per cent., or $270. He pro- 
cures a discount of the same note in his bank, and 
pays therefor $52 50 ; he has made a nett profit of 



85 

$217 50. He then repeats the operatiorij and con- 
tinues to do so until his discount line is full, and 
maintains the same during the year. His nett prof- 
its at the end of the year are niore than $19,000, 
after paying the bank lawful interest for every dol» 
lar used in the transaction, and without furnishing a 
dollar from his own resources. I do not intend to 
say that they have done this, but I do say the temp- 
tation was strong ; and I find nothing in our institu- 
tions, as now conducted, to prevent presidents and 
directors doing so when money can be made to 
bring such rates of interest out of bank. And if this 
be so, the more money presidents and directors use 
for such purposes, the more business paper is re- 
jected at their meetings for discount, and the more 
business men are driven to the usurers, and, of con- 
sequence, the higher rate of discount will be exact- 
ed, and, last, the greater their usurious profit. And 
I may be allowed to suggest that, although bank 
presidents and bank directors do not themselves di- 
rectly engage in such transactions, the effect would 
be the same if they should give their favourite Wall- 
street friends the same facilities, whether they par- 
ticipate in the ill-gotten gains or not. If I am 
again told the risk is great, and that justifies the 
extortion, I answer that I know there are individuals 
in this community who have purchased in one year 



36 

more than $300,000 in notes at or about such rates 
of discount, and every note purchased was paid at 
maturity. 

A simple illustration will show the effect of lend- 
ing and borrowing upon usury, as compared with 
traffic in the necessaries of life. 

If a bank lends $1000 dollars to the broker for 
thirty days at six per cent, interest, the transaction 
is a sale to him of the use of $1000 /or thirty days 
for five dollars. The favourite broker or money- 
lender lends the money at two and a half per cent, a 
month to the man of business ; he sells the use of 
the same $1000 for the thirty days for $25, i. e., 
what cost him five dollars for $25, or five times as 
much as it cost him. And if he lends at six per 
cent, a month he receives $60, i. e., he sells the use 
of the money for twelve times what he paid the 
bank for it. 

Now, suppose flour merchants, licensed by the 
government, holding the same exclusive privileges 
and the like monopoly and control over flour that 
the banks have over money, and restricted to sales 
at six dollars a barrel, as the banks are to six or 
seven per cent, interest ; and suppose they should 
sell to their favourites only (that is, to such as " kept 
good accounts," and thus gave them an indirect 
profit which the law forbids them to take directly) 



37 

at six dollars a barrel, to the end that these favour- 
ites might sell the flour to their needy neighbours 
for five or tvi^elve limes that sum (30 or 72 dollars) 
a barrel, would it be endured ? The community 
would sooner pull down their warehouses and plun- 
der their stores. And yet this is the same thing 
that is done with money between our banks and the 
usurers every day. 

But, to make the illustration still more exactly 
parallel, and show the hardship in its truest like- 
ness, you must suppose farther that the needy 
purchasers have (in seasons of plenty, when the 
flour merchants are, like the usurers, waiting for 
opportunity to produce a pressure) become indebt- 
ed to the flour merchants for flour to be paid in 
kind. And now they can no longer buy at six dol- 
lars a barrel ; the brokers' favourites alone can do 
that. Their credit is at stake ; their securities are 
about to be sacrificed ; they have no alternative ; 
they are driven to these favourites, and compelled 
to pay 30, 50, or even 72 dollars a barrel, with 
■which to pay their debts. Would a community 
submit to this ? Would they suffer such a monop- 
oly to continue ? Not for a day. And yet in 
money they are suffering from the same unjust op- 
pression, and are quietly told that " money is but 
D 



38 

merchandise, and the use of it is worth what it will 
bring." 

The reason this oppression is so little known, or, 
rather, so little noticed, is that these operations are 
secret ; they are made under circumstances render- 
ing secrecy of great moment to both parties ; im- 
portant to the borrower, for otherwise his credit 
would be ruined ; important to the lender, because 
his ** deeds are evil," and law, justice, and the opin- 
ion of the community, and especially his hope of 
repealing the same operation, forbid that he should 
make his transactions known ; and the effects, there- 
fore, alone are seen. Stocks, securities, and prop- 
erty of every description depreciate, and the cause 
is only perceived by the victims of usurious exac- 
tion ; and they are too often compelled to suffer and 
be still, and often, no doubt, are themselves igno- 
rant of the real reason why they cannot procure 
money as they had been accustomed to do. And I 
do not hesitate to assert that our merchants and 
other business men have lost more money by direct 
usury, and by usury charged under cover of ex- 
change or other device, than they would have 
lost if they had paid $500 per barrel for flour 
for themselves and families, and in like proportion 
for all the necessaries of life ; and this in addition 



39 

to the depreciation of their assets which such a state 
of things has produced. . 

Should a company of capitalists monopolize all 
the cotton in the country, or buy up all the flour in 
our various markets, and hold on for exorbitant 
prices, the community could be made to suffer com- 
paratively little ; as the year came around cotton 
and wheat would grow again. The people could, 
in the mean time, eat rye, and corn, and potatoes, 
and wear woollens and old clothes ; the temporary 
evil would soon cure itself ; the monopolists would 
be forced to sell, or lose all their investment ; or 
production would in a little time destroy the monop- 
oly, and we should have cotton and flour in spite of 
them. But not so with the evil produced by a mo- 
nopoly of money. This will not cure itself in one 
nor five years ; and if it does temporarily, as is 
sometimes said, " find its level," the equilibrium is 
soon destroyed by the usurers themselves. We 
have in this country already suffered seven long 
years (as long as the famine in Egypt), and our em- 
barrassments still continue ; and without some more 
powerful controlling influence than is now in opera- 
tion, it will continue for years to come. Fluctuation, 
and its constant evils, would never cease. Plenty 
would succeed scarcity, and scarcity succeed plenty, 
to enrich those who profit by the embarrassments 



40 

of others, and to the prostration of all regular busi- 
ness. The cotton and flour monopolists cannot 
conceal* their movennents, and the indignation of the 
public would visit them if their projects were car- 
ried to the extreme of oppression ; but the usurers 
can put their millions in their pockets, and no one 
shall know it except by the usury they exact as the 
premium for their loans. 

Suppose Mr. Astor, of the City of New-York, 
should on the first of May in any year, without giv^ 
ing previous notice to his tenants, raise the rent on 
his 500 or 1000 houses twenty-five per cent. ; and 
these houses are together worth $5,000,000. Many 
would leave the houses ; some might be so situated 
as to be compelled to stay; and should he insist 
that the additional rent should be paid or the houses 
closed — he has a right to do this — his means are so 
great that he could do it without inconvenience to 
himself — the damage to the community would not 
be very great; at most it would be of very brief 
continuance. Other houses could and would be 
built. He might, and no doubt would, be loudly 
censured as an extortioner ; and yet in this advance 
of his rents he has only added one and a half per 
cent, per annum to the interest or use of his capital 
invested. 

Now, suppose the same individual has the same 



41 

;amount of capital in money on deposite in bank, or 
even one half that sum, say $2,500,000, and on a 
Friday should draw it in bank notes and carry them 
home. On Saturday the banks, finding their circu- 
lation increased to that extent, would discount httle 
or nothing. On Monday he might privately em- 
ploy the usurers' convenient friend, the broker, and 
draw $2,5€0,000 in specie, under pretence that it 
was wanted for shipment. Could the banks with 
safety discount anything ? One half of all their 
specie is gone ; their deposites are reduced ; they 
are alarmed ; merchants are driven to the usurers, 
and the interest or use of money is worth two and 
a half, and perhaps even five per cent, a month. 
Should such an individual engage in this scheme, 
his usurious profit, at five per cent, a month, would 
be in his own pocket equivalent to raising the rent 
of his houses (heretofore paying six per cent, per 
annum) from $400 per annum to $4000 per annum ; 
and his usurious profit, even at two per cent, a 
month, would be equivalent to raising his rents from 
$400 to $1600 per annum, and in that ratio for 
higher rents ; and the effect would not stop here. 
Every usurer in the city would take the same op- 
portunity, and the embarrassment be continued, and 
from time to time repeated almost without limit. 
The result is as obvious as the means are easy. 
D2 



42 

Nearly all those who do business upon credit must 
break. Should a large house-owner thus raise his 
tents, he would be called an extortioner. Should a 
capitalist thus secure a large profit on his money, 
he is called a " financier." 

III. I have stated, and endeavoured to prove by 
an appeal to facts and the observation and experi- 
ence of the business men of this country, that our 
banking institutions are instruments, in the hands 
of money-lenders, in producing the fluctuations of 
plenty and scarcity of money, and in exacting and 
compelling the payment of exorbitant usurious in- 
terest, and are thus indirectly but truly guilty of the 
very evils they are created to remedy. 

But the half has not been said. Our banking in- 
stitutions, from Maine to Florida, are active co-op- 
erators in the work of plunder. I do not use such 
expressions without meaning what I say. I repeat, 
they are, and have been for years, actively engaged 
in plundering the industrious, laborious, enterprising 
portion of the community. Under cover of ex- 
change, lending uncurrent money, discounting for- 
eign paper, and by other devices, the lending of 
money upon usury has been almost their only busi- 
ness. 

I I have already shown that, by discounting only for 
those who " keep good accounts" (i. e., those who 



43 

suffer the proceeds of bills discounted to remain in 
bank, to be used as a means of a second discount), 
they realize nearly or quite double the lawful rate 
of interest. And I will now prove that they exact 
usury by charging it under cover of exchange. 

By purchase and payment of uncurrent money. 

By requiring notes discounted to be made paya- 
ble at a distance. 

And by purchasing their own obligations at de- 
preciated prices. 

In the winter of 1839, 40, a large proportion of 
the bills of the Safety-fund country banks of the 
State of New-York were at a discount of from 
three to five per cent, in this city, and the bills of 
the free banks at a discount of from five to six per 
cent. ; and yet all these banks were paying specie. 

This proves one important fact at least, viz., that 
the banks, as at present organized and conducted, 
cannot and will not regulate exchange, unless spe- 
cie-paying banks are compelled to receive the notes 
of other specie-paying banks in the same state or 
vicinity at par. It is said that, at the period I men- 
tion, the balance of trade was against the country, 
and caused this result. On the contrary, I assert 
that this state of things promoted the interest of the 
banks, while it injured the public, and was encour- 



44 

aged and kept up by the banks themselves ; and 
that the balance of trade had nothing to do with it 
whatever othervi^ise than by placing it in the power 
of the banks to continue that state of things, and thus 
secure excessive profits, in form as exchange, but 
in fact as a usurious premium upon their loans. 
And thus adequate causes will be found, independ- 
ent of the balance of trade, to produce the result 
by creating an apparent balance of trade against^ 
when the real balance is in favour of, the country. 
The error consists in assuming that because ex- 
changes are against the country, therefore the bal- 
ance of trade is against it, which by no means fol- 
lows. 

Suppose, for instance, the citizens of Rochester 
should purchase from the City of New-York 
$150,000 worth of goods ; they require that amount 
of exchange on New-York to pay for them when 
due. In the same period the millers of that city 
forward to the City of New-York $200,000 worth 
of flour. The balance of trade is clearly in favour 
of Rochester, and exchange on New- York should 
be below par. What is the fact in practice ? The 
banks in Rochester and its vicinity are the great 
money-lenders. The grain from which this flour is 
manufactured is purchased chiefly on credit ; the 
millers' drafts against the flour sent to New-York 



45 

are discounted by these banks, and their bills sent 
out to pay for grain, &c. 

Who now hold and control the exchange ? The 
banks have to their credit in the city of New-York 
the whole proceeds of the $200,000 worth of flour; 
and with this their agents here are buying up their 
bills at from five to six per cent, discount. 

Whoever wishes to remit from Rochester to 
New-York to make payments for merchandise must 
buy of the banks^nd pay the like exchange, or bring 
their bills here to be sold to their agents at the 
same loss. 

Will not the banks exact all the profit by way of 
exchange that they can ? Have they not done so 
for years past, whatever the amount to their credit 
might be ? The experience of every Western mer- 
chant, and of all who have had funds to remit, an- 
swer Yes. And by charging all they dare for ex- 
change, and by buying up their own notes here at 
five or six per cent, discount, instead of redeeming 
the bills which they lent with the money they re- 
ceived inpayment of the loan, they secure an exor- 
bitant usurious profit on nearly every discount they 
make. Suppose we estimate this profit on a dis- 
count of a draft on New- York at sixty days for 
$1000. Thediscount for the period is $10. First, 
then, they pay out $990, and receive $10 for the 



46 

use of the money ; next they purchase their own 
bills in New-York to the amount of $990 at five 
per cent, discount, and gain thereby $49 50, thus 
receiving in sixty days, by the employment of only 
$990 of their own bills, a profit of $59 50, or more 
than three per cent, a month. 

If this be possible, will these banks assist in reg- 
ulating exchanges ? On the contrary, they do all 
they can to foster the inequality ; and what chance 
has a merchant in Rochester of procuring a discount 
at bank unless he will pay three per cent, a month 
by making his note payable in the city of New- 
York ? 

I appeal with confidence to all the citizens of the 
interior for the truth of the facts I state. And I 
then ask, ought we to be surprised at the large divi- 
dends made by these banks even when their dis- 
count line and circulation are much reduced ? On 
the contrary, the greater the pressure, the larger the 
profits ; and the smaller means and lesser hazard 
produce the same or even larger dividends. 

The banks not only were in 1 838, 9, and 40, but are 
now, as a general rule, pursuing this course through- 
out this and most of the other states. Money, with 
them, " is scarce," unless the notes offered for dis- 
count are payable at some place where they can buy 
their own bills at a large discount^ and thus make 



^ 47 

more than legal interest on the desired loan. Since 
the Legislature of the State of New- York has re- 
quired the banks to redeem their bills in Albany, 
the banks in this state are not able to increase 
their profits to so large an amount. Compelled to 
redeem their bills at a point so near the City 
of New- York, the great centre of our trade, their 
bills sell at a discount not exceeding three quarters 
of one per cent., instead of five per cent, as before ; 
consequently, their profits upon discounting paper 
payable in New-York, and here purchasing their 
own bills with the funds paid here, are only ten and a 
half per cent, per annum, but still exceed the fair 
value of the use of money, and still sufiicient to en- 
sure the rejection of any discount that does not af- 
ford to them an illegal profit. 

Why, then, you will ask, do not those who have 
to make remittances draw the specie, and why did 
they not do so when the banks were charging five 
and six per cent. ? Plainly because, from the mo- 
ment they did this, all their accommodations at 
bank would be stopped ; and if they owed the 
bank, they would be required to pay at once. 

The banks in Connecticut, New-Jersey, and most 
of the other slates are conducted in a similar man- 
ner. They require notes payable at some point 
where they can realize a profit in the exchange ; 



4S 

and, in addition to this, many of them pay out as 
the proceeds of the discount depreciated bills of 
other banks, bought up by them for that purpose, or 
received from their debtors at from one to live per 
cent, below par. 

So long as this depreciated paper passes current 
for the purposes of ordinary business, this transac- 
tion has the semblance of fairness, when, in truth, 
the banks are by this means exacting and securing 
a profit of from one to three per cent, a month on 
the sum loaned. 

When customers ask for discounts the officers say, 
** We are short. Our funds are locked up in uncur- 
rent money. We should he very glad to accommO' 
date you. Such funds as we have we are willing 
to loan, if they will answer your purpose." Hav- 
ing given them notes payable at the place designa- 
ted (say New- York), the applicant receives the pro- 
ceeds, and is told, and perhaps made to believe, 
that he has been treated with especial favour ; while 
the cashier doubtless writes immediately to the 
agent in New- York to purchase and send the bank 
more uncurrent bills. 

The bills of the banks in Florida have been for 
two years past at a discount in the City of New- 
York of more than 25 per cent. An expedient ex- 



49 

tensively used by them to make a profit of this 25 
per cent, in addition to legal interest is to advance 
to the planters upon their cotton pledged as security 
for a good note discounted. The banks ship the 
cotton to New-York, and there, through their agents, 
receive its value in New-York funds, with which 
to buy up their own bills and certificates of de- 
posite. Upon being advised of the sales of cotton, 
the bank settles with the planter, charging him law- 
ful interest and all expenses and commissions, and 
paying him (if anything remain due) in bills of the 
bank, purchased, it may be, at 25 per cent, discount 
with the proceeds of his own cotton. By such 
transactions the banks are enabled to buy up their 
own bills, certificates of deposite, and other obliga- 
tions, and make in a few months at least 25 per 
cent, more than lawful interest. The planter sub- 
mits to become the instrument of these unjust gains 
because his necessities require the advance in an- 
ticipation of the sales of his cotton. The bills 
which he receives from necessity pass current as 
money, and he has no known credit elsewhere upon 
which to borrow the required amount. 

By the same or similar expedients the banks in 
this country, not only at the South, but throughout 
the states, are receiving to themselves usurious in- 
terest under cover of exchange or other device. 
E 



50 

A gentleman of nay acquaintance having occasion 
to nnake a remittance from Georgia to New- York, 
called upon one of the banks in that state for a bill 
of exchange. He was told that the bank was " not 
di'awing," but would give a certificate of deposite. 
After a great show of reluctance, the bank consent- 
ed to give a bill at seven per cent, premium. My 
friend, knowing that if a certificate of deposite were 
sent it must be sold in New- York at the same or a 
greater discount, consented to pay the premium and 
receive the bill. After the arrangement was con- 
cluded, he learned from one of the officers that the 
bank at that moment had in New-York about 
$600,000 in money and paper, running to maturity 
there (a sum greater than the whole capital of the 
bank), with which to purchase their own deprecia- 
ted bills and certificates of deposite, or to draw 
against at this exorbitant premium, as might be most 
convenient. One of the best merchants in the vi- 
cinity of the bank desired a discount of $3000. 
The only mode in which he could procure the ac- 
commodation (although the security offered was un- 
doubted) was by giving a draft on New-York, pay- 
able in sixty days, and receiving therefor the bills 
of the Georgia banks at par. 

By this operation the bank made a profit of four 
per cent, a month on the amount loaned ; at the 



61 

same time, the certificates of deposite of the same 
bank were selling in New- York at twelve and a half 
per cent, discount. By purchasing these out of 
their abundant funds here, the bank realized a profit 
of at least six and three quarters per cent, a month 
on the transaction. 

When the banks are not paying specie at home 
there is scarcely a limit to this species of lawful 
swindling ; and even when they pay specie the ex- 
action is far beyond what honesty or fair dealing 
would permit. And yet these are the institutions 
organized, chartered, and endowed with valuable 
exclusive privileges /or the public good. 

Another mode of accomplishing the same end, 
during the long-continued derangement of our cur- 
rency, is by undertaking to collect for the merchant 
and others without any direct charge for their trou- 
ble. And when the collection is made, how is it 
remitted ? First, the bank retains the funds from 
one to three months, and thus makes one or two 
operations by way of loan to others of the same 
money ; and at last remits by draft at an exor- 
bitant premium, or by certificate of deposite paya- 
ble at home, which the merchant must sell at a 
ruinous discount. Even in the State of New-York 
this has become very general. At the time I have 
above referred to, the banks in Georgia had more 



52 

money in New-York than they could possibly have 
sold within a reasonable time, even if they had of- 
fered bills of exchange at par ; but they knew full 
well (what the public seem generally not to know) 
that almost as much exchange is wanted, and will 
be purchased, at seven per cent, premium as at par, 
and they may therefore as well insist upon the profit. 
I mention these things to show, as I think they do 
show, that the banks in this country, under our 
present system, can and do constantly exact and 
receive for the loans and accommodations they give, 
exorbitant usurious gains for the use of their mon- 
ey ; and the only motive at all influential with them 
is to increase their own dividends to the utmost pos- 
sible extent, without any regard to the interest of 
the community for whose pretended benefit they 
were chartered. If this system is permitted to con- 
tinue, strip them, I say, of the garb of hypocrisy ; 
let applications for bank charters have at least the 
appearance of truth. Let them read, "If your 
honourable bodies will grant to your petitioners the 
privilege of banking, we can loan to our fellow-citi- 
zens two and one half times the amount of money 
we actually possess ; and by requiring notes paya- 
ble in New-York or other important city, can, under 
the name of exchange, or by buying up our own 
bills, or by frequent expansions and curtailments. 



53 

or by advances on produce, or by numerous other 
expedients which your petitioners already know or 
can soon learn, make more money than in any other 
way. And your petitioners will ever pray, &c." 

Such a petition would disclose the real object, or, 
at all events, the true principle upon which our 
banking institutions are conducted ; and with such 
motives, and with the power which they possess, 
they are at this moment, and for many years have 
been, active agents in producing the derangement 
of our currency. 

Before proceeding to suggest the only practica- 
ble remedy for the evils upon which I have com- 
mented, allow me to refer to some general facts 
which are drawn from official statements, and which 
prove, beyond the power of the banks to deny, that 
our banks have been usurers during our most severe 
embarrassments, and that, without the control of 
some superior power, they will continue to gather 
these iniquitous spoils, their extortion being in di- 
rect proportion to the necessity and distress of the 
community, whom they ought to relieve. 

I might turn the attention of our own citizens to 
the magnificent edifices, granite palaces, rivalling 
the temples of the East, rising in their splendour 
among ruined merchants, mechanics, and men of 
industry and enterprise, only to mock their fallen 
E2 



54 

hopes and darkened prospects ; and point, at the 
same time, to enormous dividends paid over to their 
stockholders, the spoils of oppression, during the 
years of our severest trials. And if I should go 
behind the scenes, I should tell you how president 
and directors rejoice together over their six months' 
earnings ; how they can call in the broker who has 
large accommodations and " keeps a good account," 
and can out of his three per cent, a month afford to 
aid the bank in swelling these profits under the dis- 
guise of exchange or commissions, or discounting 
notes with uncurrent money, and he and they sym- 
pathize and rejoice together; and how, when the 
dividends are declared, the stockholders are delight- 
ed, commend the wisdom of their officers, and en- 
large their salaries ; and all together, presidents, 
cashiers, directors, usurers and stockholders, rejoice 
over their growing fortunes, while the deluded vic- 
tim of extortion is groaning in vain repentance over 
the folly which the hope of better times has led on 
step by step to sacrifice the labour of his hands, the 
fruit of his toils, till all has gone, irrecoverably 
gone, to feed the hunger of our rejoicing plunder- 
ers of his substance. 

But I turn rather to the simple statement, and 
leave it to tell its own story ; and if it does not ap- 
pear that in our heaviest embarrassments our banks 



55 

have made the largest profits ; if they have not ta- 
ken advantage of the distress of others to make 
usurious gains themselves, then my language has 
been too harsh. I have pointed already to various 
modes in which it is accompHshed, and I now refer 
you to their official admission of the iniquitous 
result. 

The pubUshed statements in the New-York As- 
sembly Documents show that the average dividends 
of the Bank of America for ten years, from 1818 
to 1828, were thus: Capital, $2,500,000. Total 
amount of dividends, $15325,000, i. e., an exact 
average of 5yVo P'^^ cent, dividend annually, with 
little if any addition to their surplus. 

Now, in the two years 1836 and 1837, in which 
more usury was paid than in any two years since 
we were a nation, their profits were thus : Capital, 
$2,001,200. Profits, $645,749, i. e., an average of 
more than 16yYo P^r cent, profits annually. More 
in one year of embarrassment than in three years 
of general prosperity. 

The same published statements of the following 
six banks, viz.. Bank of America, City Bank, Me- 
chanics' Bank, Merchants' Bank, Bank of New- 
York, and Union Bank, show a result as follows : 
During the same ten years, from 1818 to 1828, 
their capital was $9,820,000. Total amount of div- 



56 

idends, $5,676,777 10. Average dividends, 5//^ 
per cent, per annum. 

Now, in the two years 1836 and 1837 the state- 
ment runs thus : Capital, $8,21 1,200. Total amount 
of profits, $2,193,653, i. e., an average profit of 
more than 13yYo P^^ cent, annually. 

The same statements, rendered by fifty-nine coun- 
try banks in this state, show that in the same two 
years, 1836 and 1837, their capital and profits were 
as follows, viz. : 1836, capital, $11,620,260 ; 1837, 
capital, $11,740,260. Total profits, $2,651,431, i. 
e., an average profit of llyVo P^r cent, per annum. 

And now 1 ask, whence these exorbitant profits ? 
In which of those periods were these institutions 
conducted with a view to benefit the community ? 
During which of those periods was other business 
most prosperous ? And, if not by directly or indi- 
rectly co-operating in the work of extortion, how did 
these gains arise 1 

Let those who have been frequenters of the se- 
cret corners of these temples dedicated to Mammon, 
who have received their loans in uncurrent money, 
Southern and Western bills of exchange, and cer- 
tificates of deposite, and especially those who have 
*' kept good accounts," answer the questions ; and I 
will then ask them to estimate the profits of those 
who have been suffered almost to monopolize the 



57 

funds of these same banks for the purpose of " sha- 
ving" their less privileged, needy neighbours without 
the walls. 

Banks are chartered for the public good, not to 
enrich the stockholders by an abuse of their powers. 
Like every other instrunient of good, they are sus- 
ceptible of such perversion from the design of their 
institution as will produce, and has produced in 
this country, immense evil. It is this that has pro- 
duced the present outcry against banks. It is this 
that has induced many to declare themselves in fa- 
vour of abolishing our whole banking system. The 
evils they have wrought have been so apparent that 
their present enemies have nearly forgotten the good 
they might accomplish if properly regulated and 
controlled. 

So long as the banks are suffered to increase 
their dividends without limit or restriction, so long 
that will be the end and purpose of their manage- 
ment, and so long will the public interest, public 
convenience, and the design of their institution be 
sacrificed. 

The great source of their power is the privilege 
they have in substance of coining money. Individ- 
uals having $500,000 in money can only loan that 
sum. If they can associate themselves and obtain 
a charter, they may, under the laws of the State of 
New- York, lend in the form of circulating notes 



58 

$1,250,000 upon the same capital ($500,000). 
Substantially, they have received the privilege (de- 
nied to individuals) of coining $750,000. Such a 
privilege undoubtedly carries with it great pov^rer 
for good or for evil, controlling not only the busi- 
ness operations of the present moment, but raising 
and depressing, from time to time, the whole prop- 
erty in the country, of which property the money 
is the measure and representative. It is therefore 
but just that such restrictions (by way of limitation 
of dividends, compelling the redemption of their 
notes, and other provisions) should be imposed as 
would compel these institutions to look to the pub- 
lic interest, by rendering that interest identical, or 
as nearly so as possible, with their own. 

And it may not be unimportant to notice the pow- 
er of all our banking institutions at any time to ex- 
tend their accommodations, and, by curtailing at 
pleasure, to produce all the evils of which I have 
spoken, not for the purpose of condemning our 
banking system, not to prove them dangerous to the 
public, but to insist most strenuously on restrictions 
that shall on the one hand, as far as practicable, de- 
prive them of the power, and on the other take away 
the temptation, to abuse the power they have. 

The total failure of the state banks to regulate 
the exchanges in this country for several years past, 



59 

whether it arises from their want of ability or their 
invariable disposition to make the greater profit by 
continuing and fostering the irregularity, proves, at 
all events, the necessity of some superior moneyed 
power, such as the United States Bank once exer- 
cised. And the experience of the same period 
proves the falsity of the suggestion, often made, 
that the exchanges will regulate themselves. 

Only a few months since our exchanges were 
nearly equalized. In the month of January the 
Southern exchanges varied but two or three per 
cent, from par. Since that time the Southern 
States have been sending their produce forward in 
large quantities, and yet, since that period, ex- 
changes from the South upon New-York have risen 
to six, twelve, and from some points to seventeen per 
cent. If the produce regulated the exchanges, one 
would conclude that produce had been rapidly ship- 
ped the other way, which those acquainted with the 
times of remittance, payment, and purchase of 
goods in New-York know to be far otherwise. 

A very great fault in our system, and one which 
cannot, by means of local institutions, be remedied, 
is that our bank notes, although issued by specie- 
paying banks, do not carry their value with them. 
They represent the amount for which they were 
issued at the place of issue only. If the bank bill 



60 

issued in Georgia was worth its nominal value in 
New-York, and, vice versa, the bank bill issued in 
New-York would command its nominal value in 
Georgia, we should suffer no embarrassments from 
derangemertt of our domestic exchanges ; and close- 
ly allied as the states of this Union nov\( are, not 
merely by conventional bonds, but by interest, by 
intercourse, and by constant mutual interchange in 
trade and business of every description, our bank- 
note currency ought to be, and may well be, of this 
description. But local state institutions cannot if 
they would, and would not if they could, accomplish 
this. 

Trade necessarily concentrates in our large cities 
in each of the states. If, then, the bank notes of the 
banks in the interior of the State of New-York 
were worth their nominal value, or par, in the City 
of New-York, they would be worth par in every 
part of the state. So in Pennsylvania, if their 
country bank bills were at par in Philadelphia ; and 
so in the other states, if their bank notes were all 
at par in their principal cities. And so it might be, 
and ought to be, with notes issued in any part of 
the United States, if carried to any other part of 
the United States. A national institution once ef- 
fected this ; it may do so again. The bills of the 
old United States Bank were at times even at a 



61 

premium in exchange for specie, and for the simple 
reason that they bore their value with them wher- 
ever they were found. 

IV. In conclusion, How shall the evils of which 
I have spoken be remedied ? I answer, By putting 
an end to the taking of usury. 

Either the energy and enterprise by which the 
wealth and resources of the country are developed 
must be cramped and repressed by the abandon- 
ment of all credit, and a narrow, inconvenient, and 
unprofitable cash system be substituted, or the ta- 
king of usury must be prevented. 

A safe, sound, and uniform system of credits 
cannot exist unless the rate or price of the use of 
money is rendered permanent beyond the power of 
money-lenders to vary. 

Can this be accomplished ? The history of this 
country furnishes the answer. Legislation has pro- 
ved wholly ineffectual. Make the usurious con- 
tracts void, attach penalties to the unlawful taking, 
and secrecy, subterfuge, and cunning will make void 
the law and evade the penalties. 

Public opinion has not hitherto proved equal to 
the evil. The usurers are busy in corrupting pub- 
lic sentiment, and concealing the iniquity by which 
they live ; and high places in our state, sacred offi- 
ces in our churches, are filled by many whose 
F 



62 

vaunted Christian charities are the fruits of usurious 
extortion. 

Can it, then, be accomplished ? Never while the 
temptation and the opportunity exist. Just men 
may be wise in devising, but craft and cunning will 
be wiser in evading and counteracting any remedy 
they may propose. 

But take away the temptation or the opportunity, 
and the evil ceases. And this leads me again to 
the history of our country. When our late United 
States Bank was in full operation usury was com-' 
paratively but little known ; and if that United 
States Bank had been under suitable restrictions, it 
would have ceased entirely. 

And I come, therefore, to say, create a National 
Bank with a capital of fifty millions of dollars, with 
branches in every state in the Union, with its divi- 
dends limited to five or six per cent., its bills at par 
in every branch in every state ; without the privi- 
lege of charging a premium for domestic exchange, 
and compelled to charge all borrowers the same in- 
terest, and compelled, whenever surplus profits 
amount to five per cent, on the capital, to reduce 
its rates of interest, and from time to lime so reduce 
and change its rate of interest that it shall never 
keep a surplus exceeding five per cent. 

1st. Such an institution would be able to loan so 



63 

freely whenever good security was offered, that no 
other money-lenders could obtain a higher rate of 
interest than she required. 

2d. Its means would be entirely sufficient to hold 
the exchanges in equilibrium, and, with the branch- 
es in every state, could and would furnish all the 
domestic exchanges necessary for the business of 
the country. 

3d. Its bills being at par in every state, would be 
always convenient for remittance, and it would be 
impossible for exchange brokers or other banks to 
exact more than a very trifling premium for ex- 
change. 

4th. If compelled to keep its own bills at par, it 
might compel all the solvent banks in any state to 
make their bills par in the branch or branches with- 
in that state. 

5th. Not being allowed either to divide profits 
beyond five or six per cent, per annum, or to ac- 
cumulate a large surplus, there could be no tempta- 
tion to expansion and curtailment, but a constant 
interest to preserve an even, uniform system of 
credits and exchanges throughout the country for 
the better convenience and safe management of its 
various branches. 

6th. The rates of interest would be lowered so 
as to correspond with the value of the use of money 



64 

in the various departments of business in which it 
is employed ; and if, by the possession of the gov- 
ernment deposites and the funds of individuals, the 
profits of the bank should be increased, the rate of 
interest would be made still lower, and thus greatly 
promote every other interest in the country. 

7th. The temptation to produce evil being entire- 
ly removed by the limitation of the profits, the pow- 
er of such an institution would be always harmless. 

8th. The direction of such a bank would neces- 
sarily be prudent, discreet, and for the public ben- 
efit, because there would be no inducement to im- 
provident risks or dangerous expansions, and, there- 
fore, the public, the billholders, and the stockhold- 
ers would always be safe. 

As to the mode in which the capital of such an 
institution should be contributed, it may not become 
me to dictate; but I cannot avoid the suggestion 
that there can be no necessity, and I cannot per- 
ceive the advantage, of suffering the stock to go 
abroad, and thus pay our dividends to foreigners. 
We want no assistance from abroad, at all events, 
beyond the specie required for the purposes of the 
bank ; and it is true in England as here, that there 
is very little specie in their moneyed operations or 
their banking capital. It is credit, and little but 
credit, that forms their money. I would, then, 



65 

much prefer a distribution of the stock among the 
states who may choose to accept it, in proportion 
to their population ; and as, under the existing state 
of things, it would undoubtedly be necessary to raise 
some portion of the capital in specie abroad, let the 
bonds of the states so accepting, having the same 
period to run as limited to the charter of the bank, 
be issued, bearing an interest of four or four and a 
half per cent, per annum ; and these, negotiated and 
endorsed by the United States, would command any 
required sum at par. So many of such bonds as 
might be found expedient might then be sent abroad. 

And now notice the result. If the semi-annual 
dividends of the bank were regularly made at six 
per cent, per annum, and the interest on the bonds, 
say four and a half per cent., were first paid, a bal- 
ance of one and a half per cent, per annum would 
remain for the stockholders. In sixty-six and two 
thirds years the slates holding the stock would re- 
ceive a sum exactly sufficient to pay every dollar of 
their bonds, even if this balance of one and a half 
per cent, were laid aside without producing a pen- 
ny ; and if this balance were kept at interest at five 
per cent, per annum, payable semi-annually, it would 
be sufficient to pay the whole amount of these bonds 
in less than thirty years. 

But I content myself with making the suggestion, 
F2 



66 

There may be political objections 'to this mode of 
creating the capital of such a bank which I am not 
qualified to discuss, but I feel assured that, in what- 
ever mode the capital is contributed, if it be suffi- 
cient in amount and restrictions are imposed upon 
its dividends, circulation, and operations in exchange 
substantially like those I have mentioned, the end. 
in view will be accomplished ; and the greatest of 
all its benefits will be the reduction of our rates 
of interest, the equalization and permanent uniform- 
ity of our exchanges ; or, in other words, the almost 
entire suppression of usury, hydra-headed, cor- 
rupting, BLASTING USURY. 



In conclusion, I take pleasure in expressing my 
conviction that there may be truly moral and virtu- 
ous men in this community who have been induced, 
by the prospect of an easy livelihood, the desire to 
accumulate a competence, or, perhaps, by the want 
of opportunity to engage in other desirable business, 
to participate in what I have denominated this nefa- 
rious traffic in money. 

I owe them no apology. " A man is known by 
the company he keeps," and he must content him- 
self if he is called by the same name. But they 



67 

have doubtless been inconsiderate, unreflecting. 
They have not properly considered the evils of 
usury, or such men could not make it their means 
of livelihood, still less their source of wealth. And 
if such men will but pause, and in the spirit of hon- 
est candour reflect that, when they receive the un- 
lawful gain, they are living, not by relieving their 
neighbour's distress, but by aggravating it ; not 
earning the profits of patient industry, but watching 
to grasp with eager clutch the hard-earned fruits of 
another's enterprise and toil ; that usury, by which 
they seek to become rich, can enrich them only by 
robbing others, and those not (as is sometimes 
said) men who can afford to pay, but men who, if 
they were not already necessitous, would never be- 
come their victims ; if they would consider these 
things they would not hesitate to abandon, yes, not 
only abandon, but join me in denouncing, a means 
of living forbidden by God and man, against which 
human laws have for ages declared their penalties, 
and which the laws of God have stamped with 
curses from the beginning. 

I will only add that I leave with you to determine 
how far I have established the propositions with 
which I commenced. If imperfectly, it is not be- 
cause the facts were wanting or the proofs inade- 
quate ; if well, more, tenfold more might be written 



68 

no less true and more conclusive, did not the im- 
propriety of being personal, and the wish to avoid 
even the appearance of malice or unkindness, forbid. 
If your patience has followed me thus far, receive 
this assurance of the high esteem of 

Your friend, 

Whitehook. 



69 



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